Response to “Re-Examining the Impact of Mandatory IFRS Adoption on IPO Underpricing” by Byard, Darrough, and Suh (2021)

6 Pages Posted: 6 Dec 2021

See all articles by Hyun A. Hong

Hyun A. Hong

University of California, Riverside (UCR) - A. Gary Anderson Graduate School of Management

Mingyi Hung

Hong Kong University of Science & Technology (HKUST)

Gerald J. Lobo

University of Houston - C.T. Bauer College of Business

Date Written: December 2, 2021

Abstract

Hong, Hung, and Lobo (2014, HHL) document a decrease in IPO underpricing and an increase in the relative proceeds from foreign markets following the 2005 mandatory IFRS adoption. In a study that re-examines the impact of mandatory IFRS adoption on IPO underpricing, Byard, Darrough, and Suh (2021, BDS) assert that IFRS adoption is not associated with IPO underpricing. However, we find that BDS incorrectly claim that they obtain similar results in their replication of HHL. Whereas HHL document a 38-82% reduction in IPO underpricing following IFRS adoption, BDS’s “replication” shows a 345-927% reduction, which casts serious doubt on the validity of their analysis. To address the concern that the IFRS mandate applies only to firms trading on EU-regulated markets, not exchange-regulated markets, we perform additional tests using a new dataset from the European Securities and Markets Authority. We find that HHL’s results are generally robust to excluding IPOs registered in exchange-regulated markets. Finally, we contend that BDS mischaracterize measurement errors in the IFRS literature, which arise from data limitations, as data errors. Our reply highlights the importance of fair representation of prior literature.

Keywords: Initial public offerings, International Financial Reporting Standards

JEL Classification: G41, G48

Suggested Citation

Hong, Hyun A. and Hung, Mingyi and Lobo, Gerald J., Response to “Re-Examining the Impact of Mandatory IFRS Adoption on IPO Underpricing” by Byard, Darrough, and Suh (2021) (December 2, 2021). Available at SSRN: https://ssrn.com/abstract=3976558 or http://dx.doi.org/10.2139/ssrn.3976558

Hyun A. Hong

University of California, Riverside (UCR) - A. Gary Anderson Graduate School of Management ( email )

Riverside, CA 92521
United States

Mingyi Hung (Contact Author)

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

Gerald J. Lobo

University of Houston - C.T. Bauer College of Business ( email )

Houston, TX 77204-6021
United States
713-743-4838 (Phone)
713-743-4828 (Fax)

HOME PAGE: http://www.bauer.uh.edu/acct/acctprofile.asp?search=Gerald%20Lobo

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